Shockwaves Across Asia: The Iran War’s Strategic Fallout

From energy disruptions to alliance tensions, a geographically distant conflict is having immediate consequences across the Indo-Pacific.

M142 High Mobility Artillery Rocket Systems (HIMARS) conduct live-fire missions during Operation Epic Fury in the U.S. Central Command area of responsibility, Feb. 28, 2026.

The Israeli-U.S. military strikes on Iran that began on February 28 have done more than ignite a Middle Eastern war. They have sent shockwaves rolling across Asia, from the Strait of Hormuz to the Sea of Japan, exposing the brittle underpinnings of regional energy systems, straining diplomatic balancing acts, and forcing governments to make hard choices they have long deferred. 

The conflict is, at its core, a distant war for most of Asia. But the consequences are arriving fast and close.

The Strait of Hormuz, effectively closed to tanker traffic since the strikes, is the jugular vein of Asian energy security. 

Japan depends on the Middle East for roughly 95 percent of its oil supplies, with about 70 percent transiting Hormuz. It is drawing on emergency reserves equivalent to 254 days of imports – among the world’s largest stockpiles. But buffer stocks are a finite reprieve, not a solution. Oil still accounts for 34.8 percent of Japan’s primary energy consumption – a legacy of the post-Fukushima retreat from nuclear power that Tokyo has never fully reversed. 

The Nikkei 225 at one point plunged more than 4,200 points in a single session. The yen weakened sharply toward 160 to the dollar, amplifying imported inflation fears. Over 85 percent of Japanese respondents are now concerned about the war’s direct impact on their lives – a remarkable number in a country not party to the conflict.

South Korea – a country that imports nearly every barrel of oil it consumes – is also feeling the effects on its energy security.  Seoul has enacted a historic fuel price cap – the first in over three decades – ordering price controls on petroleum products and threatening fines for price gouging. The move cushions lower-income households but cannot prevent the broader inflationary shock, particularly in the petrochemical industry. South Korea’s KOSPI fell more than 6 percent in the immediate aftermath of the Israeli-U.S. strikes.

For India, the exposure is more acute and more varied. The country imports 88 percent of its crude oil, and roughly half passes through Hormuz. Washington has granted India a 30-day sanctions waiver to resume oil purchases from Russia – a concession that gives Delhi a short-term lifeline while effectively rewarding Moscow with a captive buyer.

But the strait’s closure also threatens 50-60 percent of India’s LNG imports and 80-85 percent of its LPG shipments – the cooking gas on which hundreds of millions of households depend. Stocks of LPG at refiners and distributors are estimated to cover only two to three weeks of demand. India is the world’s second-largest LPG importer after China, and almost all of it comes from Gulf producers Qatar, Saudi Arabia, the United Arab Emirates (UAE), and Kuwait.

The knock-on effects are already rippling through Indian industry. Small steel producers operating on thin margins have warned of production cuts as gas supplies evaporate. Restaurant owners and ceramics and fertilizer entrepreneurs warn of shutdowns. Indian fertilizer plants were already cutting output because Qatar’s LNG – required as a feedstock – had halted production. 

Include energy inputs and feedstock costs together, and nearly half of India’s soil nutrients are physically or economically hostage to the Gulf. A sustained disruption forces a cruel choice on Delhi: expand an already $19 billion fertilizer subsidy, or risk alienating tens of millions of farming households. Hundreds of farmers staged demonstrations in the Indian capital on March 10, with nationwide protests called by farmers’ groups and trade unions to oppose the conflict.

India has built strategic petroleum reserves over recent years but remains below the globally prescribed 90-day standard. Critically, while India has eight LNG import terminals, it has no formal gas strategic reserve – a gap that is now acutely visible.

If the energy crisis is testing economic resilience, the diplomatic fallout is testing political identity. Across Asia, governments that have built their foreign policies around principled multilateralism and rule-of-law rhetoric find themselves caught between alliance obligations and their own stated values.

Japan’s predicament is perhaps the starkest. Tokyo has long built its foreign policy around fierce opposition to unilateral changes to the international order by force – a posture driven in no small part by its anxieties about China’s designs on Taiwan. Yet that same principle sits in obvious tension with Washington’s unilateral decision to strike Iran without consulting its allies. Prime Minister Takaichi Sanae has been notably reluctant to address the contradiction publicly. 

Most immediately, Japan had to scramble to ensure the safety of its citizens in the region. The government confirmed the safety of approximately 200 Japanese nationals in Iran and is preparing contingency evacuations for 7,700 Japanese nationals in neighboring countries if needed. Already, Japan has evacuated over 200 nationals from Qatar to Riyadh by land, with chartered flights home being arranged from Saudi Arabia.

South Korea faces its own version of the bind. President Lee Jae-myung acknowledged publicly that he cannot stop the United States from redeploying Patriot air defense systems stationed on Korean soil to the Middle East. The redeployment is not a catastrophic blow to South Korean deterrence. But it feeds a dangerous perception that Washington is prepared to deprioritize its East Asian allies when its own strategic interests beckon elsewhere.

India’s balancing act is equally fraught. Prime Minister Narendra Modi’s government has condemned Iranian missile strikes on Gulf states but has conspicuously issued no statement on the initial Israeli-U.S. assault. Opposition leaders Rahul Gandhi and Mallikarjun Kharge held demonstrations outside Parliament carrying banners reading “India needs leadership, not silence.” Modi’s visit to Israel shortly before the strikes, where he met Israeli Prime Minister Benjamin Netanyahu, drew criticism from opposition figures who argue it provided tacit approval for the attacks.

The government’s decision to allow three Iranian naval vessels to dock at Indian ports – ships that had participated in India’s MILAN-2026 naval exercise before a U.S. submarine sank the IRIS Dena in the Indian Ocean – has added an explosive layer to the diplomatic tension. External Affairs Minister S. Jaishankar defended the decision as simply “the right thing to do.” But the incident encapsulates India’s dilemma perfectly. Sri Lanka and India are together sheltering 434 Iranian sailors from three vessels targeted or threatened by the U.S. – a human-scale illustration of how the war generates problems that no existing policy framework adequately addresses. 

The Broader Asian........

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